How to use a credit card to build credit
Tips on how to build credit as a college student. Use a student credit card to build or repair your credit for the future. Learn what lenders are looking for in your credit and how to build up your credit. Building credit is one of the advantages of student credit cards.
One of the most important things you can have as you establish your finances is credit. Credit is basically your financial reputation. Your credit history includes such items as:
• Loan and credit card accounts you have open.
• How much money you borrow.
• Whether you make your payments on time. (This also includes bills.)
• Any missed payments.
• Late payments.
• Any bankruptcies or loan defaults.
Lenders, employers and insurance agents all look at your credit in order to decide whether you are likely to be fiscally responsible, and they make decisions based on your credit history.
Interestingly enough, having no credit can actually be more detrimental than having poor credit. With poor credit, at least lenders have an idea of what to expect. This is why it is important to establish a credit history.
One of the easiest ways to establish your credit history is to use a student credit card. They are easy to obtain, and student credit cards can be a way for you to start proving that you are financially responsible.
How a student credit card can help you establish credit
When you have a loan in your own name, it opens your credit history. A student credit card is a type of loan. You use the card, and you have to pay the money back. When you use your credit card, and make regular payments, you build a credit history. If your payments are on time every time, then you are showing that you are responsible, and your credit history becomes positive.
Student credit cards are ideal for establishing credit because they are relatively easy for students to get, even if they have no credit history. Car loans and other loans are often difficult for students to get without someone else co-signing because they require a credit history. A student credit card with a low limit ($500 to $1,000 on average) is virtually guaranteed to anyone who applies.
A student credit card is also one of the fastest ways to establish a credit profile. Credit card issuers regularly report information to the credit bureaus, and this means that
your history becomes established quickly. Payment information, balance information and other information related to your credit card is update nearly every month (60 days at most). This means that you will have a credit score and a history within 30 to 45 days of opening a credit card account.
Wise use of your student credit card
Using a student credit card to establish your credit history is not the best idea if you end up with a poor credit score. The whole idea of establishing credit is that you want to establish good credit. This means that you need to use your student credit card wisely. That way you can create a credit history that show that you have a good financial reputation.
Here are some things you can do to ensure that you are using your student credit card wisely in order to build good credit:
Only spend what you have. Buying one or two things a month with your credit card is a good way to improve your credit rating. However, you should make sure that you are only spending money that you already have. Make sure that the money is in your bank account before you use your credit card. Use it on one trip to the grocery store, or to buy something small, like a new shirt.
Pay off the balance each month. One of the best ways to build good credit is to pay off your student credit card every month. The balance is how much you owe. If you pay off your balance each month, that is reflected in your credit report. Additionally, having a low balance compared to the available credit limit on your card is very good in terms of your credit score. Additionally, paying off your balance each month means that you will not have any extra interest charges.
Make on-time payments. Paying your student credit card on time is one of the most important things you can do to build good credit. This is because your payment history is the number one thing that affects your credit score. When you are late with (or worse – miss) a payment, it is reported to the credit bureaus and it affects your score. When you are on time you also have the benefit of paying before interest is charged.
A student credit card, properly used, can be a valuable tool in helping you establish your good credit, providing a solid foundation for your future finances.Source: collegestudentcreditcard.com